Oil Services Pushing Higher

Let's take a look at some of this week's top- and bottom-performing ETFs and ETNs. Keep in mind that we cull the list to avoid duplicate sectors and we generally toss out Ultra, UltraShorts, 2X, 3X, Inverse, etc. ETFs (although there is 1 Ultra and 1 Short in this week's list).

Some of these names are lightly traded and may be fairly illiquid. Make sure that you research the holdings and design of these ETFs before considering any trade.

Data from MSN Money.

A couple of interesting International names on the outperformers list -- TAO is a lightly-traded Chinese Real Estate ETF, and also lightly-traded AFK tracks large African companies.

The Oil Services HOLDRS Trust (OIH) is a well-known, liquid name on the top performers list. This ETF tracks companies that are involved in the oil industry, including the likes of Transocean (RIG) - which is the largest holding at 17.03%. Schlumberger (SLB) comes in second with 11.79%, then Halliburton (HAL), and Diamond Offshore Drilling (DO).

Crude Oil has been on an upward swing recently, as have other commodity-related plays, amidst a general concern about increased inflation. The per-gallon price of oil has surged lately, as it often does in the peak summer driving months. OPEC (mostly Saudi Arabia) are doing their best to keep oil prices rising (or at least not dropping), by keeping oil output at current levels. During the past two months, oil has increased 36% to trade atop $65 per barrel - and OPEC member (and Saudi Oil Minister) Ali al-Naimi thinks oil should cost somewhere between $75 and $80 per barrel by the end of the year. Al-Naimi thinks that the price will rise as the economic recovery furthers.

OIH Daily Chart

You can see on the above chart that OIH has emerged from a trading range that lasted from November 2008 to April 2009. The ETF looks to have further upside potential, as it is steadily trending higher and Percent R is showing very strong readings after a recent pullback/re-test.

Have a great weekend!

Disclosure - Moby has recommended a bullish TOT option spread trade in his advisory service.

Comments

[RiskReturnO...:]

TAO is very interesting play right now. It includes the biggest, most well-known real-estate companies in Hong Kong. For those familiar with Hong Kong, the top 10 wealthiest families all have strong ties to local real estate development, so they have strong incentive to support a growing and vibrant Hong Kong property market. In addition, TAO firms now can participate in growing China's residential and commercial real estate markets. In a few years, it is possible that they can also play in Taiwan's real estate market (pending new regulations opening up Taiwan market to Chinese investments).

From the short-medium term perspective, TAO is uniquely positioned to benefit from the ultra-low interest rate in Hong Kong. As the HK$ is pegged to US$, low US interest rate tends to translate to low interest rate in HK. But, HK is not recovering from real estate bubble (at least not in the same scale as US subprime mortgage). With the latest announced stimulus, Hong Kong is bouncing back quite nicely.

The only challenge is that TAO is a relatively unknown ETF, drawing less money than EWH. But, sophisticated professional and retail investors will recognize that TAO is the best, most liquid play in the rebound in HK property market (without having to physically own property in this beautiful island).

British legal / accounting system and one of the most open capitalist markets in the world are two safety nets for foreign investors concerned about lack of transparency and liquidity.

May 30 05:45 PM

[Old Trader:]

RRO,

Thanks for the insight on TAO. I'll need to peek under the hood on this one.

May 30 07:18 PM

[silver-bullet:]

This is a play on inflation, which is coming down the pipeline.

OIH - A great hedge.

May 30 08:14 PM

[isaac the t...:]

OIH is a great investment proxy for peak oil/ inflation/ weak dollar investments. Long term options are a sure winner.

Jun 01 10:42 PM